Thanks for following the live blog again today. That's all from us this evening - but join us tomorrow for Liberation Day itself, when we'll find out the full extent of Trump's tariff regime.
Tariffs and US economic growth
While individual countries will fret about the impact that US tariffs could have on their economies, the impact on the US economy is arguably the biggest risk to global markets, given the centrality of the US in global trade. A US recession would be no fun for anyone.
However, Samuel Tombs, chief US economist at Pantheon Macroeconomics, is relaxed about the impact of tariffs on the US economy.
Despite revising his Q1 GDP growth forecast down to 1% from 1.5%, Tombs argues that “tariffs will be too small to drive a sustained downturn in consumption” in the US.
“Consumers will feel the full effects of these tariffs gradually over the course of the next year, rather than all at once,” he writes. “Businesses have had a few months to build up inventory… Many businesses change prices only when an updated version of a product is introduced.”
"Liberation Day" may be more art of the deal
Markets are jittery, but if Trump really is about to throw the global economy into a tariff-driven meltdown, then you might expect bigger movements than we’ve seen so far.
One factor currently keeping investors guessing is that many observers believe that the noise that Trump is making around tariffs is a negotiating tactic in order to wring concessions that he wants from countries.
For example, The Telegraph reports that a UK-US trade deal will be contingent on “free speech” in the UK – alluding to the case against anti-abortion protestor Livia Tossici-Bolt, in which the verdict is due on Friday. The US state department has said that it is “monitoring” the case.
While business secretary Jonathan Reynolds has denied that free speech has entered into discussions, it plays into the narrative that Trump is willing to throw America’s economic heft – and the threat of trade disruption – around in order to achieve his more politicised ends.
“If we cast our minds back to Trump’s first presidency his modus operandi was to continually escalate his threats and negotiating positions until he got whatever he wanted, knowing he represented the might and weight of the United States in all its forms,” says Kasim Zafar, chief investment officer at EQ Investors.
“His use of tariffs in his second presidency was certainly expected, but it’s fair to say the market has been surprised by the extent to which he has allowed tariffs to come into force.”
Could some countries benefit from tariffs?
We’ve seen that some commentators believe that the UK could stand to gain from tariffs, even if it is hit by them, by acting as a go-between for the US and the EU. Tariffs are likely to hit the EU harder than the UK because the bloc has a larger trade surplus with the US than the UK does.
That said, the UK government has warned today that the UK is likely to be hit by tariffs. Business and trade secretary Jonathan Reynolds today called it “a very serious and significant moment” on the BBC. He added, though, that the UK is in the “best possible position of any country” to reverse any tariffs that are imposed tomorrow.
Could other countries actually benefit from tariffs?
One theory is that tariffs on China – which are expected to be heavy – could divert some of its economic output to other countries. The most obvious rival would be India.
“Trump’s tariffs offer an opportunity to accelerate the rate at which India picks up some of China’s manufacturing share,” says Andy Draycott, portfolio manager at Chikara Investments. “We expect a meaningful increase from 1% as companies shift at least some of their manufacturing capacity to sidestep Sino-US uncertainty.
“Additionally, Trump’s recent threat of reciprocal tariffs on India could catalyse improved economic relations through further Indian concessions as officials have been debating lower duties for a variety of goods to offset the impact of tariffs,” he adds.
All that said, any marginal gains any countries are able to eke out are unlikely to outweigh the hit they'll take from the overall cost that widespread tariffs will cause to the global economy. As reported earlier today, that could be as high as $1.4 trillion.
Which countries will tariffs hit hardest?
At this stage, it’s impossible to say which countries will see the heaviest tariffs once tariff day takes effect. However, according to Neil Shearing, group chief economist at Capital Economics, the focus is likely to be on “the so-called ‘Dirty 15’”.
These are the countries with which the US runs the largest trade deficits. “That includes China, Mexico, Germany (and by extension, the EU), Japan, South Korea, Taiwan, and Vietnam,” says Shearing.
The countries that stand to be most impacted are those whose economies rely most heavily on exports to the US. While China may well see the heaviest tariffs levied, it isn’t among them: “exports to the US account for only 2-3% of GDP in China, Japan and the euro-zone,” writes Shearing.
“Mexico, Canada, and Vietnam are the most exposed, given the high share of their GDP tied to US trade,” he adds.
Tariffs and the global economy
It’s also worth recapping on why tariffs are a big deal for the global economy, and especially for UK consumers.
In essence, tariffs on imports increase the price of those goods and as such drive inflation.
Trump’s tariff day could cause major disruption to global trade.
The US is the world’s largest economy, and it also issues the world’s reserve currency. If its economy struggles, then the global economy is impacted.
“Tariffs and trade wars (or wars of any sort) are not good for the global interconnected economies and world we live in,” says Raymond Backreedy, chief investment officer at Sparrows Capital.
“Past evidence and data (1920s) has shown that isolationist policies tend to dampen global growth and push up inflation, neither of which is good for the economy, jobs and end consumers.”
Recap: what’s happening with tariffs today?
Today – 1 April – is the deadline for US commerce secretary Howard Lutnick to report back to Donald Trump with his recommendations for US tariffs on various global trading partners.
These could take the form of universal tariffs on all US imports – perhaps as high as 25%. However, it’s thought to be more likely that bespoke tariffs for each country will be proposed based on certain criteria.
These could be the tariffs that these companies levy on their own US imports, the size of the trade deficit between the countries, or other factors not directly related to international trade.
There are rumours, for example, that the UK could reduce the tax it levies on big tech firms in order to avoid punishing tariffs. Read more here: Will Reeves reform DST?
How can UK investors protect themselves from Liberation Day tariffs?
We saw a retreat by UK stocks yesterday as tensions rose ahead of tariff day. The FTSE 100 has made a stronger start to April, up around 1% so far this morning.
“President Donald Trump’s tariffs war could have far-reaching consequences for Britons, even if the UK manages to escape direct levies,” says Myron Jobson, senior personal finance analyst at Interactive Investor.
Tariffs could fuel global inflation, which would impact the UK. That could force the Bank of England to curtail its interest rate cutting program, or even reverse it with rate hikes.
“This could impact everything from mortgage rates to corporate investment, potentially slowing economic growth,” he says.
Investors with significant US exposure will experience turbulence – indeed, they will have already, with the S&P 500 having fallen 4.6% in the year to date.
“That said, long-term investors should resist the urge to make knee-jerk decisions based on short-term market movements. A well-diversified portfolio remains the best defence against geopolitical shocks,” says Jobson.
He cautions against the Magnificent Seven, which already account for 19% of the FTSE All World index.
Instead, he and Alex Watts, senior investment analyst at Interactive Investor, recommend that US allocations should be diversified across large-, mid- and small-cap stocks.
UK equities are another potential set of winners. "As markets fall in the wake of the materialisation of tariffs that were interpreted as just rhetoric in the months since Trump’s election, it may be worth to consider those regions that simply are less affected," says Watts.
"One such region could be the UK, though with negotiations ongoing between British and US negotiators, the future is not yet clear."
The potential cost of the Liberation Day trade war
This morning, the FT has reported on a study published last week by researchers at Aston Business School that suggests the trade war following Trump’s tariff day could cost the global economy $1.4 trillion.
The research uses statistical models to quantify the potential economic impact under six different scenarios, reflecting different levels of tariffs and retaliation by the countries targeted by them.
A ‘Full Global Retaliation’ scenario – whereby 25% tariffs are levied across the world, and those countries all respond in kind – would result in “extensive global disruptions, including severe US welfare losses (-2.5%), dramatically reduced trade flows worldwide, and a $1.4 trillion global welfare loss”.
On a more optimistic note for British readers, though, it notes that under this scenario “the UK faces trade declines but also gains from rerouting opportunities”.
Tariff day fears make a miserable quarter for the S&P 500
Good morning, and welcome back to our live blog covering the build-up to Liberation Day, when president Donald Trump is expected to unleash a far-reaching tariff regime on the global economy.
Markets have been hit hard as investors worry about the economic impact that these tariffs could have.
The S&P 500 actually gained 0.6% yesterday. However, this wasn’t nearly enough to reverse a damaging few weeks for the index, which has fallen 4.6% in the year to date – breaking a five-quarter winning streak, and marking the largest quarterly decline since 2022.
Keep following for more updates as we bring you the latest tariff news ahead of Liberation Day.
Thanks for following the blog today. We'll wrap things up here for this evening, but join us tomorrow morning when there will be plenty of news and reaction to developments in the US overnight.
How might tariff day impact the UK?
The FTSE 100 fell 0.9% today, with fears of the potential disruption from tariff day weighing on markets.
“Unease about the effect of Trump’s tariffs has been amplified, causing sharp moves at the start of the week,” says Susannah Streeter, head of money and markets, Hargreaves Lansdown. “London-listed stocks will not be immune to the tariff fall out.”
Prime minister Keir Starmer’s official spokesman said yesterday that he expected the UK to be impacted by the Liberation Day tariffs “alongside other countries”. While talks on a UK-US trade deal have been “constructive”, it appears no agreement will be reached in time for the UK to avoid tariffs on Wednesday.
“The UK’s flagship FTSE 100 index is particularly vulnerable this week. It’s already shed 4.2% since mid-March and could fall another 10% if tariffs hit, though UK insulation might limit losses if Trump spares Britain,” says Tony Redondo, founder at Cosmos Currency Exchange.
Gabriel McKeown, head of macroeconomics at Sad Rabbit, even thinks that the UK could benefit from the turbulence.
“With both the US and EU engaged in a tit-for-tat trade war, the UK could position itself as a neutral trade partner, leveraging its free trade agreements to fill supply chain gaps and present itself as a more stable intermediary,” he says.
Trump threatens tariffs on Russian oil over Ukraine peace deal
There is speculation that Liberation Day is less about reducing the US trade deficit, and more about using the threat of tariffs to persuade other countries to get into line behind Trump’s agenda.
On Sunday, the president told NBC News that he was considering putting secondary tariffs on Russian oil if Vladimir Putin doesn’t reach a deal on peace in Ukraine.
That would mean countries buying oil from Russia would be hit with tariffs. According to Trump, these could be anywhere from 25-50%.
It raises the question of the political motivations behind tariff day. Mark Williams, chief Asia economist at Capital Economics, raises the question over whether similar penalties could apply to countries that trade with China.
“The US would have to exert a lot of pressure to coerce most major countries into putting large tariffs on goods from China,” he writes. “However, in a world in which protectionist measures become commonplace, many more countries may choose to raise tariffs on China over coming years to protect their own markets.”
Gold surges ahead of Liberation Day
The prospect of widespread tariffs on Liberation Day is good news for gold investors.
Gold prices passed $3,100 for the first time ever this morning, continuing the yellow metal’s impressive rally as investors flock towards the safe haven asset. Though according to Tom Stevenson, investment director at Fidelity International, there could be more to it than that.
“The gold price has risen to a record $3,128 a troy ounce, supported by factors beyond its role as a safe haven during geopolitical and economic uncertainty,” says Stevenson. “Central bank buying, retail buying in India, and other influences have driven the gold price up.”
Is the trade deficit a problem?
Some economists disagree with Trump’s view that the US’ trade deficit is a bad thing, and that the tariffs expected on Liberation Day are necessary to reverse it.
John Mauldin, CEO of Mauldin Economics, writes in his Thoughts from the Frontline newsletter that the deficit is, in large part, simply a side-effect of the US dollar being the world’s reserve currency; that the US dollar is, in other words, the US’ top export.
“The US must constantly export more dollars to meet world demand. This demand for our currency makes it stronger, which in turn makes imports cheaper and exports more expensive,” he explains.
“This has been called an “exorbitant privilege” but in some ways it is also a burden. Americans are incentivized to save less money and spend more of it on imported goods.”
Mauldin goes on to explain that reversing the deficit – meaning the US suddenly ran a trade surplus – would have knock-on effects.
“The rest of the world would be starved for dollars,” he says. “The dollar would strengthen sharply enough to make our exports unaffordable to others. That wouldn’t be good for American manufacturers and their workers.
“Moreover, if this persisted then some other currency would take on the reserve role. I assume that’s not what President Trump wants, but it is where his zero-sum trade policy would ultimately lead.”
“Liberation Day” and the trade deficit
Why has Trump taken to calling Wednesday “Liberation Day”?
In essence, it boils down to the fact that, at present, the US runs a substantial trade deficit with the rest of the world: it imports more than it exports, to the tune of about $1.2 trillion annually according to the latest Census Bureau data.
Trump views this is a big problem. “We have deficits with almost every country – not every country, but almost – and we’re going to change it,” he said in February.
Explaining “Liberation Day” and his recent talks with Canadian prime minister Mark Carney to the press over the weekend, Trump elaborated: “Many countries have taken advantage of us, the likes of which nobody even thought was possible, for many, many decades.
“That has to stop,” he added.
According to Trump, then, tariff day marks a day of liberation from trade dynamics that have led to its trade deficit rising to its current level.
What is tariff day?
Tariff day – or “Liberation Day” as Trump has dubbed it – will see a set of far-reaching tariffs, which the president has alluded to since his election campaign last year, come into effect.
In the ‘American First Trade Policy’ memorandum that Trump set out on the day of his inauguration, the US secretary of commerce, Howard Lutnick, was directed to deliver a report on prospective tariff proposals to Trump by 1 April. They are expected to be enacted the following day.
Howard Lutnick, now US secretary of commerce, at the inauguration of president Donald Trump in January. Lutnick will present a report on proposed tariff regimes to Trump tomorrow, ahead of tariff day on 2 April.
“While it is hard to be confident about the ultimate motivation, the logic at least appears to be that the US should use reciprocal tariffs to induce changes in trade partners’ policies that it deems unfair and to have contributed to the US trade deficit,” writes Simon McAdam, deputy chief global economist at Capital Economics.
It’s expected that Lutnick’s proposals will recommend tariff regimes on specific countries or trading blocs (such as the EU) on a case-by-case basis. Trump has referred to these as “reciprocal tariffs”, though they diverge from the traditional understanding of the phrase (which usually pertains to reductions rather than increases in tariffs).
“The goal of reciprocal tariffs could be more about striking deals than creating a permanent source of fiscal revenue or encouraging firms to move production to the US, which are aims that would be better served by blanket tariffs in place for a long time,” says McAdam.
The tariff tale so far
Tariff day will likely see the widest tranche of tariffs yet unveiled, but they won't be the first of Trump’s second term.
Early on, he followed through on a promise to levy tariffs on imports from Mexico, Canada and China. He imposed 10% tariffs on Chinese imports on 4 February, doubling this to 20% a month later.
On the same day (4 March) as Chinese tariffs were doubled, Trump raised 25% tariffs on goods imports from Mexico and Canada, as well as a 10% tariff on Canadian energy imports. This was followed by exemptions on car imports and other goods, as well as a reduction in the tariff on potash (a fertiliser ingredient) to 10%, in the following days.
Then, on 12 March, Trump levied a 25% tariff on all steel and aluminium imports into the US.
We’ll soon know more about the further-reaching impacts of Trump’s tariff regime, but it could include a 200% tariff on alcohol imports from the EU which Trump has threatened in response to the bloc suggesting it would tax whiskey imports from the US.
Tariff eve eve
Welcome to our live blog covering what promises to be a busy week in international trade and markets.
US president Donald Trump is expected to impose widespread tariffs on the US’ global trading partners on Wednesday, which has been dubbed ‘Tariff day’ (making today ‘Tariff eve eve’). More recently, Trump has called it ‘Liberation Day’ – presumably referencing liberation from the rough deal the president believes the US gets from globalisation.
There has been – as there often is with Trump – plenty of toing and froing in the weeks building up to the announcement. While Wednesday may well bring clarity and closure on the new administration’s international trade regime, there could be further twists along the way.
We’re here to cover all of these as they come, along with expert analysis, market reactions, and explainers on what Donald Trump’s tariff regime means for your money.